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How will the Spending Review 2015 affect business?

There's a public spending cuts-shaped present in George Osborne Claus' sack, but there'll be surprises too in the Autumn Statement and Spending Review.

by Adam Gale
Last Updated: 04 Feb 2016

In case you somehow missed it, the most wonderful time of the year is almost here. No, not Christmas. We at MT are so excited about the chancellor’s Autumn Statement and Comprehensive Spending Review on Wednesday that we decided to take a sneak peek at what Santa (well, George Osborne) Claus might bring us.

Not to take all the magic out of it, but sweeping cuts to public spending are inevitable. Health, defence, international development and schools – though not education – have protected budgets. Osborne asked the others to produce plans for cuts of between 25 and 40% over the course of this Parliament.

That’s some serious belt tightening, especially after five years of austerity squeeze. Here are some ways it could affect British business.


The government has made a song and dance about providing the country with a world-class infrastructure to support the demands of business and society. Indeed, one of its most talked about policies is the plan to use high-speed trains to transform the disparate northern cities into a dynamic ‘powerhouse’ – at great cost.

But the Department for Transport is going to feel the pinch. A few weeks ago, Osborne revealed it to be one of four departments that had agreed 30% cuts (8% a year) over this Parliament. Some of this might come from cutting the government’s 10% subsidy (around £660m a year) of Transport for London, but that still leaves billions to find.

Don’t expect marquee projects like the Northern Powerhouse to suffer though. Osborne said the saving would be found in ‘efficiencies... closing low value programmes and focusing on our priorities as a country’. Whether fixing potholes on your commute or indeed making an expensive decision on London’s new runway will count as priorities remains to be seen.


If leaked memos are to be believed, Sajid Javid’s Department of Business, Innovation and Skills is in for a starvation diet, consolidating its 80 different sites down to seven or eight and halving its number of partner organisations.

Aside from altering the subsidies landscape in which some businesses work, this is likely to have its biggest overall impact on research and training. Britain has a productivity problem. While it seems unlikely that the government will slash spending on apprenticeships after investing so much politically in them – indeed it announced plans to fund three million of them by 2020 through a levy on big business – cuts to further education spending are unlikely to close the skills gap.

Cuts to public research spending, already the lowest in the G7 as a percentage of GDP, won’t help either and could start to hamper Britain’s hugely valuable, world class university sector. As in transport, expect Osborne to focus on a few high profile (and he would argue higher value) projects rather than the wider trend.


The chancellor usually offers some kind of sweetener when delivering what is otherwise bad news. Perhaps he will offer further reform of Britain’s soaring business rates, which high street businesses from tea shops to Tesco have complained about.

Unfortunately, it’s hard to see how there will be a big reduction here. Local government funding is going to be cut further, which means councils will be even more dependent on business rates to keep running essential services. If anything, this means there’s pressure to increase rates.

Whatever Osborne does, whether it’s beneficial or not to business and the economy, his central belief remains that getting control of the public finances now will protect the economy from downturns in the future, allowing business to flourish without the risk of Britain turning into Greece. It may be a case of coal in the stocking again this year then, with the promise of presents in the distant future.

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